I expect the recently-legislated bailout of the lending system to amount to a hill of beans in the long run. It's an insanely expensive gamble premised on a number of unduly optimistic assumptions. Unlike many commentators I do not subscribe to the "at least they're doing something" theory; spending money like drunken sailors in a logical vacuum potentially makes things worse. I can agree, though, that doing nothing is a poor option.

On the Friedman/Hayek-worshipping right, letting the entire financial system go belly-up is the preferred, if not only, course of action (e.g. Jeff Miron's "Bankruptcy, Not Bailout, Is the Right Answer"). The stated reasons have a lot to do with pious talk and free-market idolatry. Oh, so wonderfully principled those economic libertarians are. As usual the real motive is hidden carefully behind the curtain.

Who benefits from what Miron calls the "bankruptcy" option? Lending institutions fail, stockholders get creamed, private individuals will need a black ski mask and a gun to get a loan, and the entire economy will contract. There is no obvious winner excepting a bunch of Ron Paul supporters who will get raging erections. But Miron is careless and lets slip the winners in this scenario:

Bankruptcy means that shareholders typically get wiped out and the creditors own the company. Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines).

The "Do Absolutely Nothing" plan is about one thing – redistributing wealth by consolodating even more of it in the hands of the top 1%. Bankruptcy and financial chaos simply allow the sliver of the nation with the resources to ride out the storm to go bargain shopping. Miron's plan is a disingenuous way of driving asset prices through the floor, at which point it will just so happen that what few entities are financially healthy (JPMorgan, for example, is on a buying spree) will purchase their former rivals for pennies.

It's not just for behemoth financial conglomerates, though – the average Joe Millionaire Six-Pack can handsomely profit from buying foreclosed homes! The message is the same either way: this recession won't last forever and assets bought on the cheap now will be worth millions later. Libertarians are simply hoping that as many assets as possible end up in the bargain bin, waiting for our heroic betters to swoop in like vultures and gorge themselves on the remains of our prosperity.